NORWEGIAN ENERGY UPDATE: DEPUTY MINISTER MEETING

UNCLAS OSLO 000204

SIPDIS

SIPDIS
SENSITIVE

EUR/NB (MMCDOWELL),DEPARTMENT OF COMMERCE (LMARKOWITZ),
DEPARTMENT OF ENERGY (EROSSI,TSARKUS,JGIOVE),INR/I
(SMCCORMICK),EEB/ESC (LWRIGHT); COPENHAGEN FOR ERIK HALL

E.O. 12958: N/A
TAGS: ECON ENRG EPET PGOV SENV NO
SUBJECT: NORWEGIAN ENERGY UPDATE: DEPUTY MINISTER MEETING



1. (SBU) Summary. On April 10 Ambassador Whitney met with
Deputy Petroleum Minister Stubholt to discuss several energy
issues, including the status of the Liquefied Natural Gas
(LNG) Snoehvit project, GON views on the recent WIREC
conference, access to new oil/gas acreage, the 20th licensing
round (including a potential Svalbard territorial claim) and
clean energy cooperation. (Note: Originally scheduled to meet
with Petroleum Minister Haga; the embattled politician is
fending off charges of improperly hiring a fellow party
member as a consultant). End Summary.

Snoehvit: A Fractured Fairy Tale
--------------


2. (SBU) Ambassador Whitney raised the delays of Snoehvit,
StatoilHydro's major LNG project (50 percent of its
production will reach USG markets through Cove Point,
Maryland). Facing massive technological setbacks, relating
to coolers with insufficient capacity, the plant was slated
to make its first USG delivery last September. Instead,
working at 60 percent capacity, the project only delivered
its first US shipment in February 2008 before shutting down.


3. (SBU) Further hurdles abound. The project may return
on-line at only 60 percent capacity this fall, and
(hopefully) reach full capacity by the summer of 2009.
Reaching this stage will require tearing down the existing
facility. Stubholt stressed that the reputations of
StatoilHydro, the majority state-owned company behind the
project, and the Norwegian government itself, were on the
line.


4. (SBU) The Ambassador questioned whether the setbacks
would adversely affect the massive Shtokman project (Note:
StatoilHydro has a 24 percent stake in the holding company
developing the Shtokman field, which is the largest known
offshore gas field in the world, situated in the Russian
sector of the Barents Sea). Given the Snoehvit hurdles,
Stubholt admitted that StatoilHydro is forced to look to
alternative technologies in that project.

WIREC: Praising USG Efforts, Future Cooperation
-------------- --


5. (SBU) The Deputy Petroleum Minister led the Norwegian
WIREC delegation. She praised American efforts in clean
technology R&D, and applauded the USG focus on renewables and
energy security. While supporting President Bush's WIREC
speech, Stubholt expressed some disappointment that climate
change themes were not more prominent. Stubholt also
believes that more opportunities for USG and GON cooperation
exist in areas such as the creation of an off-shore wind
regime and in developing Carbon Capture Sequestration and
Storage technologies.

Open Doors in Future Rounds?
--------------


6. (SBU) Ambassador Whitney noted concerns raised by US
energy companies that far and few new oil and gas finds have
occurred recently. In fact, the most substantial recent
discovery, the Ormen Lange field, was discovered in 1997.
Given relatively high operating costs (which include
compliance with strict health/safety standards and up to 78
percent taxes),companies emphasize that the GON should
encourage new field development, including the potentially
energy rich Nordland VII and Troms II fields. The GON has
resisted opening up these areas, primarily due to their
environmentally sensitive fishing stocks. Without major
finds, the companies, already vying internally to place
priority on Norwegian operations, may drift out of Norway.


7. (SBU) Stubholt reiterated that support from a climate
change conscious public is needed before Nordland and Troms
could ever be opened up, with both areas the subject of a
feasibility study due in 2010. She hinted that US energy
companies should get involved publicly to quell concerns that
exploration would damage the environment, such as focusing on
a "full spectrum" of environmental issues and increasing oil
recovery technology at mature fields. If the GON approves
any access of these areas in 2010, they would not be in
operation until 2017.



8. (SBU) Stubholt raised that despite such concerns, the
high level of US company interest was evidenced given over
300 nominee blocks were submitted for the 20th Licensing
Round. (Note: Stubholt quickly dismissed an issue raised by
the Russians and Brits that one of the nominated blocks would
trigger Svalbard territorial claims).
WHITNEY